The Financial Accounting Foundation trustees are advocating for broad membership, including a possible U.S. role, in a forum of national and regional standard setters that is being formed to advise the International Accounting Standards Board.
In a letter dated Dec. 27, Financial Accounting Foundation (FAF) Chairman Jeffrey Diermeier encouraged the IFRS Foundation not to make a written commitment to IFRS a prerequisite for participation in the Accounting Standards Advisory Forum (ASAF), which will provide technical advice and feedback to the International Accounting Standards Board (IASB).
“Requiring a written commitment … would exclude many jurisdictions from membership, including those where the standard setter does not have the final authority to adopt or endorse IFRS; those where IFRS has been adopted but has been modified; and those—including the United States—where no decision has been made regarding adoption or endorsement of IFRS,” Diermeier wrote.
The SEC staff released in July a report on the effects IFRS incorporation would have in the United States, but did not make a recommendation. The SEC’s continued consideration of IFRS for U.S. public companies has been a source of frustration for IASB Chairman Hans Hoogervorst, who repeatedly has urged the United States to adopt IFRS.
The matter now rests in the hands of the SEC commissioners, who have given no indication of a timetable for considering the question.
In an Invitation to Comment on its proposal to establish the ASAF, the IFRS Foundation said it would like forum participants to commit to making their best efforts to promote the endorsement or adoption of IFRS in full and without modification over time.
The FAF trustees appear unwilling to make such a commitment. In his letter, Diermeier said that the FAF trustees believe that a more practical goal for the foreseeable future is to achieve highly comparable—but not necessarily identical—financial reporting standards that are based on a common set of international standards.
“We would encourage changes to the commitment [requirement] that would allow for the broadest possible participation in the ASAF process,” Diermeier said.
Despite the wording of the Invitation to Comment, Hoogervorst said in a speech earlier this month at the AICPA Conference on Current SEC and PCAOB Developments that he would like and expect FASB to become a fully engaged partner in the global forum.
But Hoogervorst also called for a tangible sign of U.S. commitment to a single set of global standards, which Diermeier said is a worthy objective, but not as practical for the immediate future as standards that are “highly comparable.”
Hoogervorst also warned that there is “much concern” about continued U.S. leadership in the work of the IASB if the United States does not commit to global standards.
Diermeier’s letter said that for the ASAF to achieve its objectives, its membership should include jurisdictions representing the world’s major capital markets.
The IFRS Foundation’s Invitation to Comment proposes that the ASAF consist of 12 members—three each from the Americas, Asia-Oceania and Europe, two from the world at-large, and one from Africa. The proposal says the group must be compact to allow for effective debate, but large enough for appropriate global representation.
The FAF letter supports the idea of the forum and says it could become a useful vehicle for sharing potential agenda items, research, proposals, and findings among national standard setters. Diermeier also suggested that a “critical mass” of IASB members participate in ASAF meetings to ensure effective technical discussion.
“The IFRS Foundation’s proposal … would establish a new mechanism in which the FASB and other major market standard setters could share technical perspectives with the IASB,” Diermeier said. “This has the potential to create a much higher level of cooperation among standard setters, leading to global standards that are more comparable and convergent.”
—Ken Tysiac (email@example.com) is a JofA senior editor.